HECM Counseling committee addresses property defaults

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EPISODE #738
HECM Counseling committee addresses property defaults

[Reverse Mortgage Daily] HUD’s Housing Counseling Federal Advisory Committee met and looked at lingering issues in HECM loans- including some borrowers who unexpectedly ended up in foreclosure.

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Other Stories:

  • [Think Advisor] Income for Life: Strategies to Avoid Running Out of Money in Retirement

  • Averting disaster with a Medicaid Planner

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4 comments

James E. Veale, MBT September 5, 2022 at 5:58 am

Shannon,

I found your concern for using the correct words in the last segment of your Podcast both refreshing and a model to those who speak or write about reverse mortgages. As to tenure payouts, these are only offered through an adjustable rate HECM and I have NOT found any credible or authoritative literature that supports the idea that these payouts have ever been selected by even 2% of HECM borrowers.

It is surprising to hear about the problem with property charge related defaults. What percentage, if any, of the defaults came from HECMs with case numbers assigned before 4/27/2015, i.e., before financial assessment was mandated? What percentage came from HECMs with partially funded LESAs? What percentage came from fully funded LESAs? What percentage came from voluntary LESAs? What percentage came from LESA set asides running out of funds? If these defaults mainly occurred in HECMs where the related borrowers did not participate in financial assessment, the problem is somewhat understandable. I hope a detailed breakdown of these HECMs with property charge defaults is forthcoming from HUD or is reflected in either this year’s annual report to Congress on the financial status of the MMIF or in this year’s MMIF review for the HECM portion of that fund by the outside actuaries.

As to attorneys who are licensed in the states they are advising on the Medicaid programs in, it is laughable to believe that mere legal licensing in that state has much to do with the quality of advice being provided since almost nothing on the Bar Exam delves into the perplexities of individual state Medicaid programs. An attorney rarely gets into such matters unless they offer services related to Medicaid planning or there is a family member involved.

Wil even a significant number of US senior retirees receiving SSRBs (Social Security Retirement Benefits) “RUN OUT” of money in retirement? The reality is few seniors receiving SSRBs will run out of money but there is a remote change that Congress will not act in time to avoid reductions in the amounts being received but that is not the same as RUNNING OUT of money in retirement. What most mean by this exaggerated statement is that they will not have the necessary cash flow needed to maintain the lifestyle they intended or expect during retirement; that potential problem is so real to far too many US retirees who thought they had made the right decisions and had saved the money needed to maintain that life style. To a limited degree it is the rightful concern of government that those in government conveniently seem to overlook.

It is great to see that you, Shannon, are doing so well and going on so strong after 15 years of providing these Podcasts. Congratulations Shannon, on fifteen years of great work!!!!

Reply
Don Opeka September 6, 2022 at 8:40 am

I agree with Mr. Veale’s comments. What does “Running out of money” really mean. I had a client trying to make a $1,600/month mortgage payment with $400/month in Social Security income. A Reverse Mortgage eliminated the entire payment because of the LISA and provided about $800/month of cash flow to buy food.

On the subject of defaults, my experience is that the servicers don’t do a very good job of dealing with the reverse mortgage demographic. They think forward mortgage and reverse mortgage borrowers are the same. They are not. People are not the same at 62 as they are at 22. They are not the same at 102 as they are at 62. My experience is that as people age in the reverse mortgage demographic, they need a little more help and compassion. I’ve been told directly that it’s unreasonable for a borrower to be able to call someone at the servicer that knows what they are talking about. I have copies of letters from servicers that make no sense. I’ve talked to servicing people who had no idea what they were talking about to they point they could not correctly connect the right loan and borrower. This product is extremely valuable to homeowners, but I’m tired of government and industry people blaming borrowers for consistently bad servicing. My experience is that too many “defaults” are the direct result of abusive servicing that neither government nor industry is willing to address.

Reply
Don Opeka September 6, 2022 at 1:04 pm

A good example of what I consider abusive servicing happened today. I got my Reverse Mortgage statement and found that unlike the previous servicer, PHH does not include a form to request a draw from my Reverse Mortgage. Since I am in Colorado, I called the number shown on the statement I received today for Colorado customers. After several unsuccessful tries entering my loan number, I was routed to an agent in India who informed me that he did not service Reverse Mortgages. He gave me a different number for the Reverse Mortgage servicing department. All I wanted was the form to request a draw from my Reverse Mortgage. Until I provided complete loan information and identification, they would not send me a blank form. They demanded that I consent to the call being recorded, but refused to tell me how I could get access to the recording. They list an address in Denver, but obviously don’t answer the phone at that address. I don’t have any practical way to either identify or get back to the people I talked to today.

Reply
The Positive Realist September 9, 2022 at 5:59 am

When reverse mortgages terminate, a very substantial portion of those reverse mortgages go into foreclosure. Foreclosure is nothing more than a legal process that falls into one of two categories — WITH eviction and without eviction. When eviction is involved, foreclosure goes from a legal process to a threatening event with many repercussions.

Seeing the front page of a national newspaper with an elderly helpless looking grandma sitting on her front lawn with all her personal belongs surrounding her has NEVER been helpful to our industry.

For the sake of our industry it would be much better if these two categories of foreclosures had two entirely different names. Unfortunately they do not. So without an entirely different name for foreclosure WITH eviction, we are left explaining the difference to the public.

The scare for the industry is hearing that there are nearly 30,000 reverse mortgages in default that have the potential to end in foreclosure WITH eviction.

So 7 years after April 2015, why are there so many HECM borrowers in technical default over property charges? Can someone please explain?

Reply

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